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At the beginning of July, information management vendor OpenText announced the latest iteration of its information strategy, something it is calling OpenText 3.0. The first part of the strategy — and the one that caught the attention of mainstream news outlets — was the announcement that it was cutting 1200 jobs.
The company made the announcement in an SEC filing, which went on to state it would also be hiring another 800 people in sales, professional services and engineering. These roles would be created “to support the OpenText 3.0 plan.” The filing didn’t go into any detail about the plan, but said that it would be explained in greater detail in its filings at the end of fiscal 2024.
What Does OpenText 3.0 Mean?
However, OpenText CEO Mark Barrenechea provided more details of the OpenText 3.0 strategy in a blog post. He described it as the logical evolution of the company's information management strategy.
“When we started this company, the first decade (OpenText 1.0) centered around content management with on-prem software. In the next decade (OpenText 2.0) we transitioned to information management in the hybrid cloud,” he wrote.
OpenText 3.0, he continued, will define the company’s strategy for the next three years. It will focus on three major trends, notably NextGen autonomous cloud, end-to-end security and AI for humans.
OpenText EVP and CMO Sandy Ono offered a bit more detail as to what this entails. She wrote that by 2035, the AI knowledge worker will be redefined by these trends. The result is:
1. AI Velocity
AI will revolutionize the workforce by automating routine tasks and transforming job roles. The unprecedented speed at which data must be processed, integrated and utilized for decision-making across business ecosystems is redefining operational dynamics.
2. Cloud, Security and AI Convergence
Cloud applications will drive widespread AI integration in business operations. As AI enables machines to target other machines, security challenges will escalate exponentially. With every company essentially becoming a software entity, the need for intelligence across cloud platforms, applications and international borders will intensify.
3. Trust and Stewardship
Data privacy and environmental, social and governance (ESG) objectives will become collective responsibilities. Geographic-specific data zones and sovereign clouds will be essential for global IT operations. Trust in cloud vendors and their commitment to handling your data with the utmost care will become a fundamental expectation.
Ono explained OpenText intends to provide this through:
- Cloud technologies that automate and enhance business processes, ensuring reliable information delivery.
- Business AI that transforms cloud operations by integrating intelligence and autonomous decision-making into business applications.
- The integration of AI and security features to ensure protection and compliance within the cloud.
Essentially, what it does is establish generative AI as a pillar of OpenText’s information management strategy and its products. If it seems slow off the mark in terms of generative AI, then OpenText aims to catch up.
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AI Ambitions
Nucleus Research's Evelyn McMullen believes the layoffs are likely due to the level and frequency OpenText acquisitions in recent years contributing to an overlap in its workforce, necessitating cutbacks.
The addition of the 800 posts goes to the heart of its generative AI ambitions, she continued. She points out that OpenText is slightly behind on its generative AI investments, as several other vendors in space have already released initial features.
“I have seen vendors in other SaaS markets reallocate resources to keep up with/get ahead of the Gen AI craze relative to competitors, which seems to align with this strategy,” McMullen said. "With rehiring plans geared towards engineering and sales, I imagine customers will be concerned about the levels of professional services and support they will receive from the vendor going forward."
Version 3.0 Never Bodes Well
Version 3.0 of any technology is often a sign of a problem, Hyoun Park of Amalgam Insights told Reworked.
“Version 3.0 is often a death knell for both vendors and concepts. Web 3.0 is a great example of this, a concept that really went nowhere when it comes to defining actual and meaningful technological change,” he said.
“From a practical perspective, OpenText should be talking about its progression from being a content management solution to an AI solution. In reality, whether it calls it this or not, it is still shifting towards being OpenText 2.0 where automation and AI are the cornerstones of what it does.”
Its product portfolio and messaging language, with its discussions of data visibility and step-wise manual approvals of workflows, make it clear the company is still embedded in the generation of business intelligence rather than that of generative AI, with its language of proactive guidance and multi-stage automation, he continued.
Hyoun also said that when enterprise content management stopped being a massive growth engine, OpenText had to figure out what its next-generation product portfolio would be to maintain relevance. It makes perfect sense it would want to align itself with the current era of AI, he said. The company is well-positioned to make inroads here based on the massive amounts of unstructured and semi-structured data that it has managed for decades.
“One challenge is that OpenText should have been OpenAI, a company that figured out how to build models based on billions of language-based parameters,” he said. "And OpenText is still not known in the data science or machine learning worlds as a significant player. OpenText Aviator is still barely known and poorly marketed, despite having been out for almost a year.”
OpenText 3.0 is very much a cumbersome and awkward turn, he noted. And the biggest reason that a 3.0 term might even be considered, is that OpenText pivoted away from its initial strength of being a content management solution with petabytes of content supporting the Fortune 500 as well as smaller businesses.
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He added that if OpenText had focused on its massive advantages in document and content management, it could have developed some of these capabilities to compete with DocuSign, Adobe, OpenAI and every other text, photo and video management company out there.
It still holds a lot of those advantages, as OpenText must deal with a scale and variety of data simply to support its core customers that most technology vendors never have experienced.
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Still Money to Be Made in the Cloud
OpenText’s ongoing focus on the cloud is a smart move as cloud computing remains a big revenue generator, said Datics AI CEO Umair Majeed.
“The cloud industry is still growing exponentially,” he said. "OpenText is making a prudent business decision to restructure its talent and resources around cloud and AI to meet market demands and gain a competitive advantage.”
He noted his own company's cloud offerings have generated about 60% of its revenues over the past three years.
“The flexibility, scalability and cost-effectiveness of cloud solutions are appealing to most companies today. By developing industry-leading cloud products, OpenText will be able to capture more market share and generate higher profit margins,” he said.
In terms of the job cuts, Majeed said transitioning an established company to focus on new technologies is challenging and often requires difficult decisions like job cuts and restructuring. While unfortunate, OpenText's layoffs will allow it to reallocate resources to its growth areas in cloud, AI and security, he concluded.
Generative AI Market Is Nascent
From a broader perspective, Hyoun Park believes there's still time for vendors to move into the generative AI market.While it's easy to get overwhelmed with the amount of news around generative AI, he reminds us that it is still very early days for the technology. "We have only had significant products with market share in the space for less than two years. From an enterprise perspective, that is barely long enough to test out the initial problems that can show up with a new technology."
To put it in context: Generative AI is now where the iPhone was in 2009 or where enterprise messaging systems like Slack were in 2015.
"I think that anybody creating a significant generative AI platform or strategy this year is still very much in the game. The timing is not really the issue here," he concluded. "The real challenge is whether OpenText can develop the language models, model dev and testing, bots, tools, APIs, application development capabilities, developer community, and market visibility to become better known in generative AI at a time when billions of dollars are being thrown into both product development and market visibility by the likes of OpenAI, Anthropic, Microsoft and so many other big names."